"To get rich is glorious." -- Deng Xiaoping. This is perhaps the smartest thing ever uttered by a member of the Communist Party.

Wednesday, March 18, 2009

Outsourcing your brain

A few weeks ago I read an opinion piece somewhere that argued that the financial crisis could attributed in large part not to the lack of government regulation, but because of it. Essentially the argument was that companies outsourced their risk management thinking to the government, placing more of a premium on ensuring compliance with regulation than really analyzing if they were effectively mitigating their risks. If they were compliant with the regulation it must mean that they were effectively managing risk, given that the government had determined what needed to be done to prevent financial oblivion.

I can't speak to whether this thinking actually prevailed in many corporations, but it seems plausible given that many people opt for the path of least resistance -- aka laziness -- and have a deference towards government.

Yesterday, meanwhile, I read this column by Glenn Reynolds that noted that many highway safety features actually promote more dangerous driving habits:

Give people antilock brakes, airbags and other safety devices, and they “consume” the safety improvements by driving more aggressively. This phenomenon is called the Peltzman Effect, after economist Sam Peltzman, who first wrote about it in 1976. The decades-long effort to make highways straighter, wider and better-marked, with more guardrails and rumble strips, has eliminated one class of dangers only to foster another: the complacent driver with a cellphone in one hand and a cup of coffee in the other, steering the vehicle with a knee while occasionally glancing at what’s ahead.

Meanwhile, modifying roads and intersections so drivers are less comfortable—by making driving, in some ways, more dangerous—forces people to slow down and pay attention, producing a change in behavior that, paradoxically, results in more safety. This is also true for pedestrians, who Vanderbilt says are more cautious away from crosswalks than within them because they don’t know if cars will actually stop.

Likewise, traffic circles and squares, which demand a driver’s full attention, turn out to be both safer and better at handling large volumes of traffic than traditional four-way intersections with traffic lights. In the former, people focus on what’s going on; in the latter, they relax and expect the traffic signals to do all the work. Drivers in traffic circles also communicate more with hand signals and eye contact. As Vanderbilt notes, when a traditional four-way intersection with lights was turned into a traffic square, “The responsibility for getting through the intersection was now up to the users, and they responded by communicating among themselves. The result was that the system was safer, even though the majority of users, polled in local surveys, felt that the system was more dangerous!”

I wonder if this can be applied more broadly. Is the larger phenomenon here simply that if you treat people like children who need to be carefully looked after and protected that less responsible behavior will be the result? It seems worth considering.

After all, think about the myriad of ways in which we seem to infantilize people in public policy. Social security reduces the need for people to think about the future and their retirement. Uemployment insurance reduces the need to consider saving for a "rainy day." Welfare reduces to need to consider the risks of becoming pregnant. Cheap federal flood insurance reduces the need to carefully consider the location of where to build your house. Rather than being used as a true "safety net" and last resort when disaster strikes, they are relied upon. When we make it easier and less consequential for people to make bad decisions we shouldn't be surprised when they...make more bad decisions. It some respects it is a subsidy for poor decision making.

Not only does it promote slothful thinking and intellectual disengagement, but government action can also reduce one's sense of responsibility. When the government takes the leading role for tackling social ills it removes the need for people to take it upon themselves to play a role. After all, you already wrote a check when you paid your taxes.

It would appear that many policies and government actions aimed at promoting stability and community cohesion actually achieve the opposite. When the government assumes more responsibility for people's lives don't be surprised when the people respond by taking on less.